Economics of Australia’s national broadband network in doubt

The CEO of Australia’s National Broadband Network (NBN) company, Bill Morrow, has confirmed what the industry has been saying for years: that the network builder’s economic model is broken and that – under current conditions – it may never turn a profit, report IT News. “In a sensational interview… Morrow effectively laid out an ultimatum to the government: ditch the idea of making a return on taxpayers’ investment, or face more politically unpalatable options.” The NBN model has always been predicated on it generating an internal rate of return (IRR) on the A$29.5 billion taxpayer investment in the project. Taxpayers have also “loaned” NBN up to A$19.5 billion more to complete the build. One of the loan’s conditions is that NBN must get into a position to be able to refinance it. But Morrow’s comments raise significant doubts about the project’s economics. “The government has two options: to regulate to protect this model, or to realise that NBN won’t have the finances it thought and might require some off-budget monies to go in to make it happen,” he said. Morrow said further regulation would have to be levied on 4G mobile operators, whose services were already “a viable alternative to NBN”. NBN has increasingly sought regulatory and economic protection from networks that were never envisaged as NBN competitors. Recently, this has seen corporate networks be subjected to a monthly tax; Morrow has now raised the prospect of levying 4G users as well, sooner rather than later. See more